Recent research carried out by Hymans Robertson assessed Master trusts over three phases involving growth (managing assets for members who are 30 years from retirement), consolidation (for members who are five years from retirement) and pre-retirement (for members who are one year from retirement).

The findings overall suggested that some providers are too focused on short-term risk mitigation in the growth phase which could lead to delivering poorer member outcomes. TPT has a balanced approach and focuses on leveraging high risk assets as part of its investment strategy and using them to its advantage, rather than focusing too heavily on a 'one investment solution fits all members' approach. As a result, TPT has been able to deliver higher returns with managed volatility for members and thus has outperformed other Master Trust providers.

Defining Risk

Defining risk is no easy task as risk is multi-faceted and can mean different things to different pension providers. To help better prepare for risk in each phase, knowing how members want to use their retirement and assessing the level of volatility can help. However, this can be difficult to pin down as people more than likely don't know how they want to spend their retirement or how a member's life can change over the years. Keeping open channels of communication with member and provider is one way to tap into members and their retirement aspirations.

Sarah Smart, Chair of TPT's Trustee Board said, "We do ask our members what they will intend to do with their pot when they retire, or reach retirement age and by regular engagement with members we, and all providers, will be able to build a better picture of member aspirations and manage funds in accordance with those."

By building relationships with customers and focusing on the interests of the member, TPT is able to better analyse and assess the effects certain risks will have on their returns. The company is then able to develop a strategy for dealing with high risk assets, in a way that effectively balances these risks with the needs of the member.

To read the full article about this study, please visit Hymans' website.